Funds under management on the up but Rathbones hits out a red tape

TWO of the best-known investment managers in the Scottish market yesterday posted increases in their funds under management (FUM) amid a warning that changes to the regulatory system were sapping directors' time.

Rathbones posted a 5 per cent rise in FUM in the six months to 30 June to 16.4 billion, beating a 0.9 per cent gain for its benchmark index, while Brewin Dolphin's FUM rose by 7 per cent to 24.9bn in its third quarter.

Pre-tax profits at Rathbones, whose Edinburgh office is its largest outside London, jumped by nearly one-third to 20.6 million, allowing the firm to raise its interim dividend by 1p to 17p. But chief executive Andy Pomfret warned that he was spending two days a week dealing with regulatory changes, as the Financial Services Authority) is broken up to produce the Prudential Regulatory Authority and the Financial Conduct Authority.

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As a bank, Pomfret said his firm would be regulated by both bodies. He also hit out at the Financial Services Compensation Scheme after investment managers were forced to pay levies following the collapse of Keydata.

Pomfret led a group that called for a deeper investigation into the Keydata's demise but said that he was yet to hear back about his demands, which were made in February.

Paul Stockton, Rathbones group financial director, told The Scotsman: "As a firm, we're not anti-regulation and we support the retail distribution review, for example. But it takes time to take these things off paper and put them into practice."

Stockton said the Edinburgh office, which has 40 staff - with a further seven in Aberdeen, now manages 2bn of funds.

He added: "Now that we've moved from South Charlotte Street to St Andrew Square, I think we now have an office that matches our brand and it will pay dividends in the increasingly competitive wealth management sector in Edinburgh."

Rathbones bought portfolios of private client funds from Bank of Scotland in 2009.

Peel Hunt analyst Stuart Duncan raised his recommendation from "hold" to "buy" and noted: "Rathbones continues to widen the gap between it and the other private client brokers in terms of quality and operating margins."

Brewin Dolphin posted a 10.7 per cent increase in income to 68m in the three months to 26 June on the back of its rise in FUM.

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Duncan, who also carries a "buy" rating on Brewin, added: "The investment case for Brewin remains predicated on the self-help measures that the group is implementing and, in particular, the roll-out of a new IT system should deliver operating margin accretion and help close the discount to the sector."

• Accounts filed at Companies House for Baillie Gifford & Co - a subsidiary of the wider Edinburgh-based eponymous partnership - showed FUM rose by 19 per cent to 5.2bn in the year to 31 March.While declining to reveal accounts for the full partnership, Baillie Gifford said its total FUM had risen by 18 per cent to 76.7bn in the 12 months to 30 June.